BSP: Foreign banks can still enter PH

THE Philippine banking system can still accommodate more foreign players, as their share to total assets of the industry remains below the level allowed by law, the central bank said.

In its “Report on the Philippine Financial System” for the second semester of 2018 released over the weekend, the Bangko Sentral ng Pilipinas (BSP) said the aggregate share of these banks remained stable at 7.1 percent last year.

With this, the BSP said, “there is still room to accommodate further foreign bank entry and participation, since the aggregate share of FBBs (foreign bank branches) and subsidiaries currently operating in the Philippines remained well below the 40-percent ceiling set under Section 3 of RA [Republic Act] No. 7721, as amended by RA No. 10641.”

Signed in July 2014, RA 10641, or the Act Allowing the Full Entry of Foreign Banks in the Philippines, paved the way for the entry of new players.

Foreign banks can operate in the country as a branch or wholly owned subsidiary, with the Bangko Sentral taking into consideration strategic relationships and reciprocity rights in accepting applications.

“While the said law fully liberalizes the entry of foreign banks in the Philippines, it provides safety nets, such that at least 60 percent of the banking system’s total resources shall be controlled by domestic banks, which are majority-owned by Filipinos,” the central bank said.

Since the law’s implementation, the BSP’s policymaking Monetary Board has approved 12 foreign bank applications. Of these, five are from Taiwan: Chang Hwa Bank
Commercial Bank Ltd., Cathay United Bank, Yuanta Commercial Bank, First Commercial Bank and Hua Nan Commercial Bank Ltd.

South Korea’s Woori Bank, Industrial Bank of Korea and Shinhan Bank; Singapore’s United Overseas Bank Ltd.; Japan’s Sumitomo Mitsui Banking Corp.; Malaysia’s

CIMB Bank Berhad; and China’s Industrial and Commercial Bank of China are the rest.

This number, according to the Bangko Sentral, is expected to further increase due to the ongoing Asean Banking Integration Framework.

“Outside this regional integration initiative, there are more foreign banks that signified interest [in establishing a] presence in the Philippines, due to its sound macroeconomic fundamentals and stable growth prospects,” it said.

Surge in industy profit

Also, the central bank reported that the banking industry’s net income grew by 26.9 percent to P12.3 billion last year.

It generated a total operating income of P63.2 billion on account of the net interest income from loans receivables of P43.0 billion, as well as non-interest income from fees and commission and other income.

Foreign banks’ total resources expanded by 11.2 percent to P1.204 trillion as of end-December 2018, thanks to the 61.2 percent year-on- year increase in their investment portfolio.

Loan quality remained stable at 1.0 percent as of year-end.

The subgroup was also said to have kept sufficient buffer against credit losses, as its non-performing loans and non-performing assets coverage ratios were above 100 percent at 179.8 percent and 144.1 percent, respectively.

On the other hand, distressed assets ratios of the industry hit 1.3 percent as of end-December.

Total funding reached P1.204 trillion, an 11.2-percent increase from the year-ago figure.

“Deposit liabilities remained the principal source of funding by foreign banks,” the BSP said, noting that it accounted for 59.0 percent of total resources as of end-December.

Outstanding deposits rose by 4.1 percent to P710.5 billion as of year-end, which can be attributed to the 20.3-percent growth in time deposits.

Lastly, the industry’s capital level grew by 11.4 percent to P186.7 billion as of end-December, “due to the combined effect of the earnings accumulated through the years, as well as capital infused by both existing and new FBBs.”

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